Remortgaging allows you to take out a new mortgage on your property either for replacing the existing mortgage or for borrowing more against the property. Almost 30% of home loans in the UK are remortgaged loans.
The total outstanding residential mortgage loans mounted up to £1,442 billion in 2018 Q4; the figure is 3.3% higher than the previous year. Similarly, the value of total gross mortgage debt advances scaled up 5.5% in 2018 Q4 than previous year’s mark to touch the figure £72.9 billion. What do both the statistics reflect? Households are using their property to get secured loans at a lower interest rate. Mortgaging allows borrowing at a reasonable price even with bad credit score because the lenders feel safe by having the rights over the mortgaged property. But if you need to borrow more while having bad credit rating but the property is mortgaged, what will you do? Remortgaging is the most viable solution to meet out the new financial need at a reasonable cost.
Benefits of Remortgaging- Why You Should Think About Remortgaging:
1- You can borrow more at a lower interest rate by evaluating your popularity
2- You can utilize home’s equity to generate additional cash in hand
3- You can switch your debts to better financial scheme better suitable to the new financial situation
4- You can consolidate multiple debts into one debt to lower the monthly payment as well as to improve the credit score
5- You can save a lot on interest amount to be paid organizations the remaining debt amount
6- You can pay more without paying early payment fee
There were 49,800 new remortgages in January 2018; the figure is 19.1% higher than that in 2017 January. It means, benefits of remortgaging are being noticed by the more and more British homeowners; so, you too can explore the opportunity.
How Does Remortgaging Work?
Remortgage is the process to switch existing mortgage to fresh deal terminating the current agreement. The property remains the same but its value changes as per the current real estate market. If you feel you are not getting the best value of mortgaged property in terms of borrowed amount or offered interest rate, you should consider for remortgaging. To understand the process, please go through this interesting story.
Compare Remortgage Rates & Deals- The Most Crucial Task:
Before going ahead, I would like to share a story:
Peterson family lives happily in London having their own home of worth £ 300,000. They have a mortgage loan of £200,000 over it.
Mr. and Mrs. Peterson are not happy with the mortgage conditions because they think that they are paying at a higher end because of paying the interest at a flexible rate. Because of paying a comparatively high monthly installment for over the years, their credit score is also coming down- definitely not a good sign for future borrowing.
They know that remortgaging can save big money provided they could get the right deal. They decide to compare the deals from different lenders carefully. They asked the current lender to get a better interest rate; they also confirmed about exit fee. As Mr. Peterson was expecting a pay rise, he wanted to repay the debt at the earliest with no cost early payment facility. Ultimately, they found many profitable deals from reliable lenders agree for remortgaging at a better interest rate, better repayment flexibility, and more borrowing. By switching their mortgage to remortgage despite having a poor credit score, they saved a lot by consolidating the debts into the one drawing lower monthly installment.
The numbers of mortgage lenders try to entice homeowners with fee-free remortgaging offers. There are moreover 1500 remortgaging products.
1- Fixed rate remortgages are more popular.
2- Tracker remortgages apply variable interest rates according to the current interest rate proposed by the Bank of England. It is a good option when the interest rates are expected to fall but it is the rarest case. In addition, you always remain on the verge of paying more in case interest rates are revised.
3- The capped rate mortgage is variable rate mortgage but with a limit to how far high the interest rate can increase.
4- The discounted mortgage offers a discounted rate on the lender’s SVR but for a limited period.
5- The offset mortgage reduces the overall interest amount you pay by offsetting the savings against outstanding remortgage balance. You wouldn’t get any interest on the savings during the period.
There are numbers of online tools to comparing the remortgage deals; you can sort out the appealing offers by checking the mortgage type, monthly price, interest rate, overall cost, APRC representative, applied terms and conditions. You also need to consider how much you need, afford and repay. The repayment period is also a crucial aspect to be considered.
How Much Does The Remortgaging Cost?
Remortgaging is easy. Is it affordable and practical? Yes, it is practical as 70% of British landlords and homeowners do it. Affordability depends upon the fees involved that vary at large from lender to lender.
1- Arrangement fee: It can cost up to £2,000.
2- Legal fee: It is an extra expense to pay for the services of a solicitor who takes care of legal matters.
3- Admin fee: Different lenders charge a different fee for setting up new remortgage.
4- Valuation: Whenever you shift your mortgage agreement to another lender, you will have to re-evaluate your property. It draws fee for the evaluator.
The eligibility for remortgaging depends upon personal profile, earning, credit rating, property value, and lender’s lending criteria.
How to Apply for Remortgage Online:
Before applying for a remortgage, ask your credit report from all the three top credit reference agencies. Make sure, these have no incorrect information. Paid subscription service is also available to download your credit report. Collect all the documents:
1- Proof of received benefits
2- Monthly utility bills
3- Three months’ pay slips
4- P60 form from an employer
5- Bank statement of 2-3 years
6- Driving license or passport as identity proof
7- A statement about the monthly expenses mentioning council tax, insurance policies, living costs, etc
Concluding Note: Remortgaging is a trend generated by the weak economy of British households facing high inflammation rate, low wages rise and weak economic conditions because of Brexit. It is more profitable when your existing mortgage deal is about to expire. However, every loan costs- less or more; so, think twice before mortgaged borrowing especially with a bad credit score.